Cybercrime yields more cash than drugs?

Current News Updates

Cybercrime yields more cash than drugs?

Peter Andrews had his attention drawn to this article on cybercrime and drugs on the Yahoo News service. Highlights of the original article:

"Last year was the first year that proceeds from cybercrime were greater than proceeds from the sale of illegal drugs, and that was, I believe, over $105 billion," - Valerie McNiven in an interview with Reuters. McNiven advises the US Treasury on cybercrime.

Web sites used by fraudsters for "phishing" - the practice of tricking computer users into revealing their bank details and other personal data - only stay on the Internet for a maximum of 48 hours

"When you have identity thefts or corruption and manipulation of information there (developing countries), it becomes almost more important because ... their systems start getting compromised from the get-go" - McNiven

A major expansion of crime is human trafficking and pornography.

McNiven gave her interview to Reuters
while she speaking in Riyadh at a conference on information security in the banking sector.

Compliance and Privacy has a Different View

Andrews, for complianceandprivacy.com offers a different viewpoint.

The claims have been discussed on the Anti Phishing Working Group (APWG) list. The claim comes from a recognized source but the 'headline' figure covers a wide range of Internet security issues and is thus very misleading.

If the losses from phishing fraud, DDoS extortion etc. were anywhere close to $105 billion everyone in the IT Security sector would be able to command enormous salaries because they would all be head hunted on a jobs carousel. And paradoxically Alan Greenspan would be testifying in Congress to explain why half the banks in the country have already failed.

Cybercrime figures are Inflated

The problem with the headline figure is that the vast majority of the $105 billion claimed is at best an estimated opportunity loss. The US retail value of the pirate DVD hawked in India and China is undoubtedly in the tens of billions but it is doubtful that legitimate sales would increase by even a tenth of that if all piracy stopped tomorrow. The pirates themselves are certainly not selling for the full US retail value so it really is not justified to claim that cybercrime is more profitable than drugs even using the broad definition used.

At the APWG a banker trashed the Gartner estimate of US losses to cybercrime of $995 million. The bankers have the ability to measure this figure for themselves.

Cybercrime losses still significant

The measurable losses from Internet facilitated fraud are significant and more than sufficient to demand urgent attention from all concerned.

The profits to the cybercriminals are certainly less than the measurable loss. Money laundering, package reshipping etc are all lossy. The criminal who steals a credit card number and uses it to buy a $700 camera on Amazon will sell it on Ebay for $400, they will then spend another $300 getting the camera to the buyer. The money is stolen of course but it adds to the total loss. In the end the perpetrator will probably steal $1000 worth of goods and services but only turn $250 of that into untraceable cash.

Strong Similarities to Drug Trade

There are strong similarities to the drug trade though. The figures there are also inflated, the street value of heroin made from Afghan poppies is astronomical, but only a fraction of the total crop reaches the street.

Andrews recommends that people read the book 'Freakanomics' which has a very interesting chapter asking the question why drug dealers live with their parents. The answer is that the drugs trade is phenomenally profitable for people at the top of the pyramid but the people at the bottom get paid less per hour than minimum wage.